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State Senate Democratic Leader Robert J. Mellow appears to have made out well with the sale last year of his Peckville office building.

Taxpayers weren't so lucky.

Mr. Mellow sold the building at 524 Main St. for nearly twice its appraised value in 2006. Since the sale, the publicly funded rent on the Senate office has increased substantially, making it the most expensive legislative office among eight senators in Northeast Pennsylvania.

The property and Mr. Mellow's ties to it have come under scrutiny with the disclosure that first Mr. Mellow's wife, and then the senator himself, co-owned the building, meaning the senator paid himself public funds to rent his Senate office space.

The arrangement is under investigation by the state Ethics Commission.

The Peckville building was appraised at $190,000 in 2006. His former wife, Diane, who co-owned the building in 2006, commissioned the appraisal as part of the divorce proceedings. Mr. Mellow assumed his ex-wife's share in the building with their divorce.

Two years after the $190,000 appraisal, with the local real estate market in decline, the property sold for $350,000.

Since the sale, rent on the senator's office jumped from $2,400 a month, plus utilities, to $4,600 a month, utilities included. Details are contained in the Senate lease agreement with the building's new owners, Ibis Realty Inc.

Under the previous lease, utilities for the office averaged about $675 a month, meaning the average total monthly cost to taxpayers was about $3,075, according to Senate figures. The new lease costs almost 50 percent more a month.

The rent is the highest of any senator's office in Northeast Pennsylvania. State Sen. Lisa Boscola, D-18, Lower Saucon Twp., is second at about $3,600 a month.

State Sen. Raphael Musto, D-14, Pittston Twp., rents almost as much space as Mr. Mellow for his township location for $1,666 a month.

The rent hike on Mr. Mellow's office is largely because taxpayers are now paying $1,200 a month to rent 20 parking spaces next to the building at $60 each. Under the old lease, there was no charge for parking.

By comparison, rent and utilities for Mr. Mellow's campaign office, housed in the same Peckville building, only increased from $527 to $580 a month on average, or about 10 percent, according to the campaign's financial reports.

The reports contain no mention of fees for parking. Mr. Mellow's campaign committee pays the rent and utilities.

Technically, excluding the $1,200 a month for parking, the rent and utilities for the Senate office rose about 10 percent, as well - from $3,075 to $3,400.

The building also housed Mellow & Merkel and James J. Mellow Co., both accounting firms of which Mr. Mellow was part owner. As of 2008, Mellow & Merkel no longer appeared on Mr. Mellow's financial interest statement. Together, the two firms appear to have paid somewhat less than $900 a month rent in 2004, based on figures provided to Ms. Mellow's appraiser. It is unknown exactly how much square footage the campaign office and the two accounting firms rented.

The new lease allows Ibis to raise the rent based on increases in the Consumer Price Index for Philadelphia and surrounding areas, or up to 3 percent per year. The lease remains in effect until at least Dec. 31, 2010, a month after Mr. Mellow's current term ends, and may be renewed with additional four-year terms.

The rent did not appear to increase during the time the Mellows owned the building. Celestine Giordano, the wife of Gabriel Giordano, a longtime aide to the senator, was co-owner of the building, first with Mr. Mellow's ex-wife and then with the senator.

In November, about two months after the sale, Mr. Mellow paid off a $240,000 mortgage from First National Community Bank in Dunmore on his new home at 110 Oakhill Drive, Archbald, a property he acquired on June 20, 2008, for $269,900.

Real-estate appraisers say a higher-priced lease could have raised the building's value.

"The Senate clerk's office is responsible for negotiating all of the leases," she said.

She denied the rent was raised to boost the value of the building.

"No," Ms. Scullin said when asked the question directly. "Mr. Mellow's office doesn't negotiate the rent. It doesn't negotiate any of that."

Asked if the senator would want the best rent deal for taxpayers, she said, "Of course. But again, he doesn't have any input into that. That is the Senate clerk's office that is responsible for negotiating the Senate leases."

Efforts to reach Senate clerk W. Russell Faber, who was appointed to his post by Mr. Mellow in 1992, were unsuccessful.

Jim Tressler, a co-owner of Ibis and the company's secretary, noted the new lease includes the costs of utilities and insurance and said he negotiated the deal with Mr. Faber. Mr. Mellow had nothing to do with the negotiations or setting the lease terms, he said.

"Absolutely none," Mr. Tressler said of the senator's role. Efforts to reach the president of Ibis, developer Michael Cestone, were unsuccessful.

The sharp increase in the property's value two years after their divorce piqued the interest of Mr. Mellow's ex-wife.

She has asked the Lackawanna County Court to throw out the couple's divorce settlement, citing the Peckville building's increased value as an example of how her ex-husband's financial situation differs from 2006 when their divorce was finalized.

In addition to his $113,468 legislative salary, the senator earns $25,000 to $36,000 a year as a member of the Blue Cross board of directors and an unspecified amount for being on the board of AllOne Health Group, a Blue Cross subsidiary, Mrs. Mellow contends.

He also earns at least $25,000 a year as director of Penseco Financial Services, the parent company of Penn Security Bank, which recently merged with Old Forge Bank, where he sat on the board of directors, her complaint states.

As part of the merger, the senator received 4,064 shares of stock from Penseco or $102.28 a share for his Old Forge Bank stock, she charged.

The Peckville building's sale price is curious, partly because of the 2006 appraisal but also because the sale happened when the real estate market was in decline.

Mr. Mellow, who first disclosed his co-ownership of the property on his 2007 financial interest statement, acknowledged the strugging real-estate market on his 2007 and 2008 financial interest statements.

He and his partner had tried unsuccessfully to sell the property "due to present issues" in the real estate and financial markets, he wrote.

When the property did sell, the Senate lease could have played a key role in the purchase price, appraisers said.

Mrs. Mellow's 2006 appraisal was done by Ron Koldjeski, who said the only way the $350,000 sale price could be justified based on his appraisal is if a $17,000 management fee on the property were eliminated, the building's rental income went up sharply, or both.

Mr. Koldjeski said he did his appraisal based on information from Brad Inc., the former owner of the building. Brad Inc., was formed by a partnership between Diane Mellow and Mrs. Giordano. It was his ex-wife's share in Brad that led to Mr. Mellow's ownership of the property.

Brad, according to Mr. Koldjeski, claimed a management fee expense of $17,400 a year. If the fee was eliminated, his appraisal would have come in around $402,000, he agreed. If the management fee were eliminated and the rent increase were included, the number may have come closer to $670,000, using his methodology.

Local real-estate appraisers agreed that rental and other income generated by a commercial property can influence its market value. Value is typically based more on generated income than on market conditions and a property producing a bigger income means its value could increase, even in a slumping economy, they said.

So if the rent on a commercial property goes up, the property's market value goes up.

"That income is what's most important in (appraising) a commercial/industrial property," said Tom Capezio, owner of CRS Real Estate Services in Blakely, who spoke in general terms and not specifically about Mr. Mellow's property. "The value of a commercial/industrial property is based on income or potential income."

Ibis signed the Senate lease a month after buying the building, but the property and the rental payments serve as collateral for the mortgage. According to terms of the mortgage, the rent goes directly to the bank if Ibis defaults.

Ibis Realty purchased the property with an open-ended mortgage of up to $650,000 or nearly twice the actual purchase price of the property. The mortgage was obtained from the Fidelity Deposit and Discount Bank in Dunmore. Mr. Tressler said the reason for the difference is Ibis consolidated other debt under one mortgage, a consolidation which is reflected in the mortgage.

Joanne Marsili, a Fidelity spokeswoman, declined to comment, saying the bank does not discuss transactions with individual customers.

Mr. Tressler said in July that he negotiated the sale with Mr. Giordano, whose wife remained a co-owner until the sale to Ibis. Mr. Mellow was not involved in those negotiations, he said. Efforts to reach the Giordanos were unsuccessful.

Mr. Tressler said he was unaware Mr. Mellow co-owned the building and added there is "absolutely no relationship between Mr. Mellow and any principal at Ibis."

"This was an arm's-length transaction negotiated with Gabe Giordano," he said.

Robert Swift, the Times-Tribune's Harrisburg chief, contributed to this story.

Contact the writer: bkrawczeniuk@timesshamrock.com

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Hey TVOTAP, I hope you're really kidding about the muslim thing. Their imams call the shots in that "culture." I wouldn't want my wife or daughters forced to wear that sack over their faces and bodies or to walk 10 steps behind me. No thanks!

I hope all you people vote. Probably not. While this story make the whole thing sound fishy and I guess it probably smells that way for a reason, the whole amount that could be stinky is small change. Not to say we should not care, but to say that this level of corruption can be found everywhere in this area. Teachers still pay for their positions unless of course they are related to the school board, all jobs are given to political allies or family and friends. No outrage. We accept it across the board and then you want to act shocked that someone would do something like this. Look at all the boro worker, fireman, policeman and how many got the job on qualifications and not through connections. When it comes to teachers it is a joke. If you are not connected you have zero chance of getting a job. My answer is vote them all out and keep doing it until we get our elected officials to work for us and not to line their pockets. If you commented here and are outraged, I hope to hell you are registered to vote and exercise that right every chance you get. Until we get enough non connected people voting things are not going to change.

I still think that we should live by the Muslim rule for thieves, first offense, lop off one hand, second one, off goes a foot, however, for Senator Mellow he'd have all his body appendages lopped off, then when he goes swimming we could really call him BOB. All kidding aside, we should live by the Muslim rule, then I'd open up a prosthesis shop and retire after 6 months with all the thieve politician's in Lackawanna and Luzerne county as my client's. My company name would be, "Hand Club for Politician's". Again, all kidding aside, we only have ourselves to blame for this mess. We keep voting them in and in and in without a thought to check on them to make certain that the hand (or claw) isn't in the cookie jar. I just can't figure people out anymore. These guys are like that kids game "Hungry, Hungry Hippo" but's it's our hard earned money that they make a grab for and not toy marbles, and the worse part is that WE ALLOW IT. Flogging is too good for these crooks.

odd, if you seach Robert J Mellow within the Landex application on the Recorder of Deeds Website found within Lackawannacounty.org he purchased a house on Vincent drive, Archbald for $310k and then mortgaged $350k, and another $112k within a week. Did he sell the building to himself under an assumed company? figures are close to being the same - also with this house, don't think it would even apraise close to these figures? what do you think?

It's seven o'clock on the Sunday night that this story hit the papers and only fifteen comments have been posted !!! This guy and his buddies are ( legally ? ) stealing YOUR money and that's all the outrage generated. (And this is on top of the budget fiasco for which Mellow had a major responsibility.)NEPA therefore must like their current situation and deserves whatever fate comes our way if you believe the saying that "you get the government you deserve". Apathy is alive and well and these guys couldn't be happier.

Denaple Mellow Ceston Connect the dots then watch them pass the card games. I can't take it anymore. This is where my effing tax money is going and I am mad as hell. So mad i want to....................

This PIG has been screwing the taxpayers that voted for him for years. Maybe they'll wise up or the Feds will get him. He's another lifelong pig politician that has to go. At least Corbett will be on him. It's time for a change people.